How do voting shares work?

Shares that allow a shareholder to vote on issues about company policy are known as voting shares. Common stock is often used to represent voting shares in a firm. Certain share types, like preferred stock, may only sometimes provide the power to vote.

How Share Voting Operates

Voting shareholders can influence choices about the firm’s future course. For example, the owners of voting shares could vote on an acquisition offer that a firm is contemplating from another company or a group of investors.

Voting share owners usually get frequent messages from the corporation about issues that must be voted on before the organization takes action. Their ownership of shares and their value are unaffected by their choice to vote or not on such matters. Nevertheless, the votes might lead to other decisions that impact the business’s market value.

Particular Points to Remember

It is not unusual for so-called activist investors to push voting shareowners to vote to support a course of action or resolution they believe the firm should take.

In hostile takeover offers, the acquiring party may target voting shareholders to obtain sufficient support to impose a change in the company’s operations. This may include replacing the present board of directors, opening the door to more organizational changes, and dismissing and replacing the business’s senior executives.

A vote among shareholders who possess voting shares is part of the approval procedure for the transaction, provided the board of directors approves the company’s sale. If voting shareowners feel that a bid falls short of their estimate of the company’s worth, they can reject it.

Voting Share Types

The degree of voting power granted to shareholders may vary based on the kinds of shares issued. For instance, a business could set aside a class of shares with multiple voting rights for the company’s founders, senior executives, and early workers.

Management may issue extra voting shares with a single vote per share. Additionally, shares with no voting power may be issued.

Some stakeholders would have more individual voting power over the choices that form the business under such a structure. Additionally, the market value of the various voting share classes may vary, especially if additional shares are made available via a stock split.

A Voting Shares Example

Among the most well-known businesses with many share classes is Google. Class A shares with voting rights are represented by the shares trading under the ticker symbol GOOGL, while Class C shares without voting rights are represented by the shares trading under GOOG. Google also has Class B shares that are not traded. Insiders of the corporation own these shares, which have supervoting rights (10 votes for each Google Class B share).

There are many share classes in Berkshire Hathaway, which Warren Buffett owns. Class A corporation shares are voting shares traded under the ticker name BRK.A. As an alternative, investors may buy Class B Berkshire shares for a far lower price, but they will have little control over the company’s management.

Conclusion

• Investors who own voting shares have a voice in corporate policy decisions made by the firm, including the election of the board of directors.
• Voting shares can also approve or reject significant business decisions, including mergers.
• Companies might offer a variety of share classes, some with voting rights and others without.
• Companies that provide voting and non-voting shares include Google and Berkshire Hathaway.